March 9, 2011 – Wis. Stat. section 70.111(1) exempts from taxation personal items within a home – like jewelry, pianos, or private libraries – if such items are kept for personal use by the owner. But the exemption may not apply if someone rents his or her home to others.
The City of Sheboygan levied a $625 tax on the personal property located within Mary Faydash’s home for the tax year 2008. That year, Faydash rented out her home for 16 nights by advertising it on the Internet.
Faydash challenged the levy, but the circuit court ruled that Faydash did not meet her burden to prove the property was exempt from taxation under section 70.111(1). The District II Wisconsin Court of Appeals in Faydash v. City of Sheboygan, 2010AP2073 (March 2, 2011) recently affirmed the circuit court.
The appeals court recognized that section 70.111(1) does not require a property owner to keep the property solely for his or her own personal use in order for the tax exemption to apply. But any commercial use of the property must be “de minimis” or “inconsequential,” the court explained.
“Given that ‘kept for personal use’ does not explicitly limit the use of personal property solely to personal use, the decisive question before us is: whether Faydash’s rental property – available for rent year round, yet rented in fact for sixteen days – is de minimis or inconsequential,” wrote Judge Daniel Anderson.
The appeals court agreed that Faydash did not meet her burden because “she failed to establish that holding out her property for a commercial purpose was inconsequential.”
The court distinguished Deutsches Land, Inc. v. City of Glendale, 225 Wis. 2d 70, 591 N.W.2d 583 (1999), a case in which the Wisconsin Supreme Court found a taxpayer’s commercial use of property was de minimis where the taxpayer used the property for profit on 20 occasions.
In contrast, the appeals court explained, Faydash did not limit availability of her home and the personal property within to a de minimis number of days.
“The record does not reveal that Faydash chose to limit rental to sixteen days, it simply shows that she was able to find renters for sixteen days,” Judge Anderson wrote. “The year-round advertising of her home for rent translates into a year-round availability of her home for commercial use.”
Judge Anderson noted that the outcome may have been different if Faydash explicitly limited the number of rental dates that were available to a de minimis number.